Attorney General of Kansas — Opinion
September 16, 2009.
Re: Uniform Commercial Code — Secured Transactions — Perfection and Priority — When Filing Required to Perfect Security Interest; Record of Mortgage as Fixture Filing
Uniform Commercial Code — Secured Transactions — Filing-Filing Office — Contents of Financing Statement; Record of Mortgage as Financing Statement — Effectiveness of Filing; Record of Mortgage as Fixture Filing
Synopsis:
A record of mortgage can be filed as a financing statement covering fixtures with the Register of Deeds in the county where the collateral is located if such record complies with the requirements of a fixture filing. The Register of Deeds cannot refuse to accept such record for failure to use a UCC-1 form. Cited herein: K.S.A. 2008 Supp. 84-9-101, 84-9-102, 84-9-310, 84-9-501, 84-9-502, 84-9-516, 84-9-520, 84-9-521.
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Steve Six, Attorney General
The Honorable Tom Hawk State Representative, 67th District 3115 Harahey Ridge Manhattan, KS 66502
Dear Representative Hawk:
As state representative for the 67th district, you inquire whether a party with a security interest in fixtures related to real property can file a record of mortgage, rather than a uniform initial financing statement (UCC-1 form). You advise that some Registers of Deeds refuse to accept a record of a mortgage and, instead, require a UCC-1 form. To address this issue, we must review several Uniform Commercial Code (UCC) provisions.
Although Article 9 of the UCC was revised (Revised Article 9) in 2000, [1] its purpose remained unchanged-to provide a comprehensive scheme governing secured transactions in personal property and fixtures.[2] This is accomplished, in part, by filing a financing statement to perfect a security interest in collateral;[3] a financing statement filed properly constitutes notice to third parties of such secured interest.[4] A financing statement must include the debtor’s name, the secured party’s name, and a description of the collateral.[5]
The Revised Article 9 adopted a uniform initial financing statement form, [6] or a UCC-1 form. The form is designed to reduce errors by creditors and filing offices, allow uniformity and usage in all states, and permit electronic filing and searching of UCC records.[7] A filing office that accepts written records cannot refuse to accept a UCC-1 form.[8] However, this does not mean that a filing office can reject other types of statutorily authorized financing statements.[9]
A financing statement covering fixtures is filed with the Register of Deeds in the county where the collateral is located.[10] This is known as a “fixture filing.”[11] The term “fixtures” is defined as “goods that have become so related to particular real property that an interest in them arises under real property law.”[12] A fixture filing must not only satisfy the above requirements for a financing statement but also (1) indicate that it covers a fixture as collateral; (2) indicate that it is to be filed in the real property records; (3) describe the real property to which the collateral is related; and (4) provide the name of the record owner if the debtor does not have an interest of record in the real property.[13]
Although the Revised Article 9 adopted the UCC-1 form, a record of mortgage can serve as an alternative financing statement covering fixtures. K.S.A. 2008 Supp. 84-9-502(c) states:
A record of mortgage is effective . . . as a financing statement filed as a fixture filing . . . only if:
(1) The record indicates the goods . . . that it covers;
(2) the goods are or are to become fixtures related to the real property described in the record . . .;
(3) the record satisfies the requirements for a financing statement in this section other than an indication that it is to be filed in the real property records; and
(4) the record is recorded.
A “record” is broadly defined as “information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.”[14] A mortgage is a “record.” A UCC-1 form is not the exclusive method for perfecting a security interest in a fixture. This position is supported by two statutes that were added to the Revised Article 9. The first limits the reasons that a filing office can refuse to accept a financing statement[15] and the second lists those reasons-none include the failure to use a UCC-1 form.[16]
Based upon a review of the above provisions, a record of mortgage can be filed as a financing statement covering fixtures with the Register of Deeds in the county where the collateral is located if such record complies with the requirements of a fixture filing. The Register of Deeds cannot refuse to accept such record for failure to use a UCC-1 form.
Sincerely,
Steve Six Attorney General
Janet L. Arndt Assistant Attorney General
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